The National Association of Realtors today reported that existing-home sales fell 8.0% to a seasonally adjusted annual rate of 5.04 million units in September from a downwardly revised pace of 5.48 million in August, 19.1% below September 2006. The number was the lowest sales level since the NAR began reporting combined single-family and condominium sales in 1999.

Inventory of unsold homes increased another 0.4% to 4.40 million existing homes, a 10.5-month supply, up sharply from a downwardly revised 9.6-month supply in August.

Sales of existing single-family homes plunged 8.6% to their lowest level in a decade, to a seasonally adjusted annual rate of 4.38 million, 19.8% below September 2006. Condo sales fell 4.3% to a seasonally adjusted annual rate of 660,000, 14.7% below year-ago levels.

The numbers widely missed Wall Street expectations, and shortly after they were released, the markets were pricing in a 100% chance that the Federal Reserve Open Market Committee would again cut interest rates at its regular monthly meeting next week.

The median existing home sales price dropped 4.2% from year-ago levels to $211,700 in September. The Realtor group attributed the magnitude of the drop to fewer sales at the top end of the market. The median existing single-family home price was down 4.9% to $210,200; the median condo price was up 1.4% to $221,700.

The NAR claims that home prices are trending up in the Northeast and in the condo sector, which many analysts find unlikely. The NAR also said that in other areas not dependent on jumbo loans, such as much of the Midwest, prices are rising.

"Mortgage problems were peaking back in August when many of the September closings were being negotiated, and that slowed sales notably in higher priced areas that rely more on jumbo loans," said Lawrence Yun, NAR senior economist. "It appears raw inventories are stabilizing, but the housing supply is a bit inflated now because the sales pace does not reflect underlying market conditions ­ sales were dampened by the mortgage cancellations," Yun explained. "Once the pent-up demand begins to move, we'll see housing supplies begin to ease and then prices will edge up."

Regionally, existing-home sales in the South fell 6.0% to an annual pace of2.05 million, 18.7% below a year ago, with median prices down 5.5% from last year to $174,400. The Midwest declined 7.0% to 1.19 million, down 16.2% year-over-year, with prices up 1.4% $170,700, according to NAR. The West plunged 9.9% to 910,000, off 27.8% from last year, with prices down 8.8% to $308,900. The Northeast also plunged 10% to 900,000, 13.5% off last year's pace, with prices, again according to NAR, up 0.5% to $261,700.

In a research note to investors, Michael Rehaut of J.P. Morgan Securities wrote, "We believe today's highly elevated inventory levels will cause further significant pressure on pricing (and other fundamentals), and drive large impairment charges over the next few quarters, pushing the emergence of a trough further out."